Banking News

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One foot forward two steps back: Savings accounts on the rise, but so is spending

22 February 2008 / by Joy Tibbs

More people have savings accounts and are using them than at this time last year, but people are also spending more, creating a savings deficit, according to research from Birmingham Midshires.

The research shows that Britons have a strong and growing appetite for saving, with 69 per cent of people now saving, a three per cent increase when compared to a year ago, but the current economic climate has meant that people have to spend more on necessities like food, energy, and mortgage payments.

While Britons have set aside an average of £814 over the past quarter, they have raided their savings accounts for an average of £961 during the same period, forming a black hole of £147.

This reveals a stark contrast when compared to the beginning of last year, when £813 was saved over the last quarter of 2006, but an average of just £349 was taken out of savings accounts, leaving a positive savings balance of almost £500 – nearly £650 more than current savings habits.

Jason Robinson, Director of Savings Operations at Birmingham Midshires, said of the survey's results: "Our latest Saving Britain report shows a slight increase in the number of people saving, which is encouraging. However, we would urge savers to keep an eye on how much they are dipping into their accounts and remain vigilant about their overall savings balance.

"We recommend that savers have the equivalent of at least three months’ salary in their savings accounts. It is important to top those savings back up and make sure they're in an account which gives the right balance of access and interest rate."

Rachel Thrussell, head of savings at Moneyfacts.co.uk, added that families have seen their finances severely stretched over the last year as the credit crunch has taken hold, which has caused them to dip into their savings in order to make ends meet. However, she continued, there has never been a better time to start saving, because "The battle for savers money is fierce with many institutions launching accounts paying higher than expected rates following the base rate cut."